Archive for November 2010

Most of us, we had physical science courses at school, and we learned that inertia is also a power. We can observe this phenomenon not only in physical science, but in other contexts, and such phenomenon has time to time negative consequences. I was reading an article few years ago in a magazine explaining that some negative events are the consequences of wrong decision, and can be avoid. For example, in the tragedy of the “Challenger” space shuttle, engineers were aware about the leakage problems with the boosters and the linked risks, but they decided to take off the shuttle. We know what happened after. If the consequences are known, why do we take the wrong decision?

Most of the time, we have to face a problem, we analyze it and elaborate solutions to solve it. But this problem has to be debated with other partners. In this group of partners, there are people who have more influence than others, who can influence the others. And some of the people will finally accept the decision of the majority

I would like to tell an example of such phenomenon of inertia and the negative consequences of it. A non-profit organization received a donation amounted to 750 thousand euros from somebody who had no heirs, which was a really appreciable amount for this small organization. At that time, the board of directors decided to take advice from a bank and invest that money in quoted shares. They decided also to hire permanent employees in order to develop some projects and to promote the organization. The plan was to cover the needs of the organization with the expected interests revenues and realized gains of the invested capital. But this plan totally failed with the fall of financial market in the year 2002.

At the general assembly I was attending, I received a sample of the annual accounts. I was surprised to see an important loss in the accounts, but what surprised me was that the amount of all the revenues did not cover the salaries costs, and apparently, the board of directors did not take any appropriate measures of action plan to avoid such situation.

My first thought was that this board of director was not competent to ensure the assigned responsibilities. Some of them said that it was the fault of the bank if they lost so much money. We can not agree with such comment, as it is the treasurer or the financial director who is responsible to manage the finance aspects and to take the appropriate decisions. So, my first thought was not so bad, but by discussing with each directors, each of them told me that it was not their own decision to invest the received money in such financial product. I found this attitude very strange, but it showed the temper of these people. If such decision is taken, it is because everybody agree, or because some people does not want to decide and take the same opinion than the others, and because they want to stay pleasant in the eyes of the others. It is also the problem of shared responsibilities. If a group of people have to decide something and by this way have a shared responsibilities, some people will always say that if something fails, it is the fault of the other. Can we consider that such board of directors is competent?

The consequences of this situation is that some employees received their letter of dismissal. And some directors said that it was really a social tragedy, as it was the consequence of the non-decision of other people and not of them.

The question is the following: when we need to have a group of people to take a decision, are each member of the group independent and competent, or are they chosen, because we know that some of them will have the same opinion than the majority? If it is not the case, like in the described example above, we can see what are the consequences of non-decision, and that inertia is a power,…a negative power.

As member of the board of a small non-profit organization, the board of directors had recently a discussion with the project manager about the difficulties to manage a team of employees and volunteers. He was explaining the daily conflicts and tensions he has to manage, which is not an easy task for different reasons.

To describe the context, we have to know that some employees are hired in a reintegration framework. These people lost they jobs in the past, they lost the workless allowances. It means that these people are socially weakened. This reintegration program help them to find again a place in the society, to trust themselves and to reintegration the job market. These people need to be managed with clear objectives and instructions. Within the organization, these employees have to work with volunteers, and as mentioned before, the collaboration is not always on the top.

On one side, we have employees who are linked to the organization by a work contract, with clearly defined duties and objectives. They know that if they are not respecting certain rules or defined duties in their work contract, they can be sanctioned. On the other side, we have volunteers who have no specific contractual link and duties, but only a moral commitment. The tensions who are appearing is that some volunteers are doing what they want to do, and not always what has to be done. They do not accept any remarks from the employees, and the employees have difficulties to accept remarks from volunteers “who have no specific obligations and who are there for their own satisfaction and not to sustain the common goal.”

By observing this situation, we think immediately to the necessity to define goals and objectives of the organization, and to describe how each person can operate and interact to make the assigned project feasible. By describing clear goals and assigned roles to the team members, employees as volunteers, we have to ask them first if they are subscribing to the project, if there is a matching between the needs of the project and their expectations. This is an essential condition to be filled by the hired employes, but also for the volunteers. I would say that this condition is more important for the volunteers who are only linked to the project by a moral commitment. They have to understand that they have to contribute to the project on a efficient way, to operate on a collaborative way with the employees. By doing like this, they are contributing to the achievement of the targets of the organization, but they are helping also the employees hired in this reintegration program to achieve goals, to trust themselves and to empower their social links.

This situation shows how it is important to clearly define and explain what are the objectives of a project and what are the objectives of each member of the project team. They have to perceive that each project has to be structured and organized, and that each member of the team has to play a specific role. The projects are taking place in an profit or non-organization, where structure, organization and team spirit are the essential key factors of success, and that there is no personal success without common success. Peter Drucker was used to say: “Management by objective works, if you know the objectives. Ninety percent of the time, you don’t.”

At the opening of the International Forum for Human Development in Agadir (Morocco), Dominique Strauss Kahn, the director of the International Monetary Fund, said that the financial and economical crisis destroyed around 30 millions jobs around the world. He said that in a perspective of a new globalization, the first priority should be the employment.

By reading these figures about employment, could we say that the economical and financial crisis is over, beside the fact that the company results are better than in 2009, and that the stock exchange markets recovered more or less their level from before the crisis? It should be premature to take such conclusions.

I was reading an article about the crisis effects in the United States of America, where there are now the mid-term elections, and where the consequences of the crisis on job market are a real issue for Barack Obama re-election. The particularity of the United States, and also of the United Kingdom, is that people are deeply indebted, and the level of unemployment remains high. People are facing real problem to reimburse their loans and credit card invoices. The risk of personal bankruptcy remains high, and as consequences, the financial system remains fragile. Within these two conditions, it is difficult to re-start the sustainable economical growth. And we have not to forget that main countries are facing to a high public debt, after their monetary intervention to save banks from bankruptcy. To try to restart the economical growth on a sustainable way, by allowing people to contract new debts should not be a good idea. Such strategy would be a risk to weaken the financial system, with the risk that the states could not intervene a second time to rescue the banks.

It does not surprise anybody to see that millions of jobs were lost in these particular exceptional economical circumstances. Companies were obliged to take restructuring measures in order to preserve their profitability. We heard at that time, companies which did not want to take the risk and were unable to make some forecasts in such misty circumstances. But since many years, we can see companies cutting jobs in order to maximize their profits and to give more return to the investors. Is it a sustainable logic?

If you want to create economical growth, it implies that people needs to have revenues in order to contract produced goods and services. Main of the people earn revenues from their work. A company hiring people to produce goods or services, is paying a salary to the employees, and so, is creating a wealth re-distribution mechanism. A company can only be profitable, if people can pay the price of the produced goods or services. This equation is easy to understand. These last years, the maximization of short-term financial profits was the main objective of investors and not a sustainable economical development. The financial and economical crisis induced significant value impairments, and in some case, a negative return on investments.

Here, we can see the major difference between economical growth and economical development. It is not forbidden to think that if companies were more focused on human capital and know-how than on financial profits, they would have probably lost a few percent of profit, but they would have contributed to maintain a purchasing power level for the people, and by consequences, ensure future revenues. They could also preserve the know-how of the company. With the development of the new technologies, each people is playing a key role in the companies, and the replacement of such profiles represents a cost for the company. But this logic is not followed by some investors, more focused on personal interests than common interests. And these speculative logical is a break for the business development. Today, companies are facing difficulties to develop their business, because they can not find credits to finance their development.

In a sustainable economical development model, you are not only focused on profitability, but you are focused on a range of key factors: business development, finance management, marketing, human capital management. As in many projects, it is fundamental to determine what is the real goal. In a sustainable economical model, the goal should be the wellness of the people and the business sustainability, which implies a long term view.